Clause 32 of the Listing Agreement with stock exchanges mandates that companies supply a complete and full copy of the balance-sheet, profit and loss account and directors' report to every shareholder and, on request , to any member of the exchange. The company, however, may supply a single copy of the complete balance-sheet, profit and loss account and directors' report to shareholders residing in the same household; the company however, on receipt of request, shall supply individual copies as well.. Further, the company will also supply an abridged version of the balance-sheet to all the shareholders in the same household.

In case the company changes its name, suggesting any new line of business (including software business), after January 1, 1998, or it does so hereafter, the company will have to disclose the turnover, income, etc. from such new activities separately in the annual results for three years from the date of change of name. In addition to the above provisions, listed companies which decide to change their names would be required to comply with the following :

A time period of at least one year should have elapsed from the last name-change.

At least 50 per cent of the total revenue in the preceding year should have been accounted for by the new activity suggested by the new name.

There is also the requirement to publish a cash flow statement and a set of consolidated financial statements.

The Securities and Exchange Board of India (SEBI), through Circular No SEBI/CFD/DIL/LA/2/2007/ 26/4 of April 26, 2007, has permitted the sending of abridged annual reports to shareholders with a rider that the company would have to send a full set of annual report on a specific request . This would certainly bring relief to many corporates as it not only reduces some of their workload but also saves on printing costs .

It is also a fact that a good majority of shareholders are interested only in the highlights of the financial performance and strategies than in how much the company has paid its auditors. Their prime concern is how the financial performance of the company affects its stock price. It is probably the banks, financial institutions and research analysts who would read through the fine-print and give their opinion about the strategies of the company. SEBI has however retained the clauses that mandate companies to provide a cash flow statement and a set of consolidated financial statements a logical move, as anything else would have clashed with accounting standards. .

Quarterly Reporting

However, SEBI might have to look at the clauses regarding quarterly reporting . While the present format captures significant financial parameters of the company, there are no specific clauses for significant disclosures. The shareholder is entitled to know at a reasonable time why a particular financial parameter has not met expectations. SEBI, in consultation with the Institute of Chartered Accountants of India, could probably devise a format that caters to both the quarterly reporting as well as the abridged annual reporting now permitted by SEBI.

Mohan R. Lavi
(The author is a Hyderabad-based chartered accountant.)